Assuming all other factors remain unchanged, ________ would increase a firm's price-earnings ratio.

Question

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A reduction in investor risk aversion would lead to an increase in demand for the firm's stock, resulting in an increase in its price-earnings ratio. Option A would decrease the price-earnings ratio as an increase in dividend payout ratio would reduce the firm's earnings per share. Similarly, option C, an expected increase in the level of inflation, and option D, an increase in the yield on Treasury bills, would increase interest rates, leading to a decrease in the price-earnings ratio.

Assuming All Other Factors Remain Unchanged, ________ Would Increase a Firm's